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Evaluating Privatization as a Strategy to Provide Regional Transit Service

This study will examine efficiency and effectiveness of providing regional transit service through privatization as a strategy to achieve financial resiliency for regional transit systems. In particular, we seek to answer the following two sets of questions in this study. The first set of questions evaluates the consequences of the transit service privatization by measuring changes in service improvements, cost efficiency, and cost-effectiveness of service provision in two individual transit service districts. The second set of questions examine whether or not and how efficiently one private firm that contracts with two different jurisdictions can achieve better regional coordination for transit service in multiple aspects, such as planning, management, operation, and adopting new technologies, while avoiding geographic equity issues and other jurisdictional problems. While the overall cost-efficiency and cost-effectiveness of regional transit service also depend on transaction costs of contracting and actual contractual terms, it is hypothesized that a private firm has a strong incentive to increase ridership to generate more fare revenue and present a good performance for future contracts by combining services in the two separate areas through internal coordination. This study will provide valuable information on the effectiveness of transit service contracting, and will improve our understanding of the benefits and costs of privatization as a provision strategy to achieve financial resiliency for regional transit service. It will also help transit mangers and policy makers learn about issues that need to be addressed to improve their systems' cost-effectiveness by privatization. Additionally, State and Federal agencies may increase their capability to design and target technical assistance and financial resources to encourage more cost-effective transit services.